Australia’s mandatory climate-related financial reporting requirements are entering their next phase. With Group 2 entities beginning to report for financial years commencing on or after 1 July 2026, many Australian organisations are now entering a critical preparation period. Businesses that leave preparations until the end of the financial year may find themselves struggling to gather reliable data, establish governance processes and meet disclosure requirements.
Preparing early is an important part of managing business risk, meeting stakeholder expectations and ensuring compliance with Australia’s evolving sustainability reporting framework.
In this guide, we explain who falls within Group 2, what the reporting requirements involve and the practical steps businesses should take now to prepare.
Businesses that are unsure where to begin can benefit from expert support with mandatory climate reporting to understand their obligations, identify gaps and prepare for AASB S2-aligned disclosures.
What Is Group 2 Climate Reporting?
Australia’s mandatory climate reporting regime is being introduced in stages under the Corporations Act, with reporting prepared in accordance with the Australian Sustainability Reporting Standards, particularly AASB S2 Climate-related Disclosures.. The requirements apply to eligible companies preparing annual financial reports and are phased in over three reporting groups.
Group 2 reporting generally applies to organisations that satisfy at least two of the following three criteria:
- Consolidated annual revenue of $200 million or more
- Consolidated gross assets of $500 million or more
- 250 or more employees
The Group 2 cohort also includes other relevant National Greenhouse and Energy Reporting (NGER) entities and certain asset owners, such as registered schemes, registrable superannuation entities and retail corporate collective investment vehicles that meet the relevant asset threshold. Reporting begins for financial years commencing on or after 1 July 2026.
Even businesses that are not directly captured by these thresholds may experience increasing requests from customers, investors or larger reporting entities for emissions and climate-related information as supply chains adapt to the new reporting environment.
Why Early Preparation Matters
Climate reporting extends well beyond calculating greenhouse gas emissions.
Businesses must develop systems that demonstrate how climate-related risks and opportunities are identified, managed and incorporated into governance and strategic decision-making. This information becomes part of the annual sustainability report submitted alongside financial reporting.
Organisations that prepare early benefit by:
- Allowing sufficient time to collect reliable data
- Identifying reporting gaps before reporting deadlines
- Improving board and executive readiness
- Reducing the likelihood of compliance issues
- Building confidence among investors, customers and regulators
Many businesses discover that collecting quality data across multiple sites, departments and suppliers takes considerably longer than expected. Starting early makes this process far more manageable.
Understand Your Reporting Obligations
The first step is confirming whether your organisation falls within Group 2 or is likely to become subject to future reporting requirements.
This assessment should consider:
- Current financial thresholds
- Employee numbers
- Group structure
- NGER obligations
- Future business growth
Some organisations that currently sit below the thresholds may exceed them within the next reporting period. Understanding your position now allows adequate time to prepare systems before reporting becomes mandatory.
Strengthen Climate Governance
Governance is one of the foundations of climate reporting. Boards and senior leadership should understand:
- Their climate reporting responsibilities
- Material climate risks and opportunities
- Oversight and decision-making processes
- Accountability across the organisation
Clear governance structures demonstrate that climate-related matters are actively managed rather than treated as a standalone reporting exercise.
Many businesses establish internal working groups that include representatives from finance, sustainability, operations, procurement and risk management to support implementation.
Build a Reliable Greenhouse Gas Inventory
One of the most significant preparation tasks involves establishing an accurate greenhouse gas inventory.
Businesses should identify and measure:
Scope 1 emissions
Direct emissions from owned or controlled operations. Examples include:
- Fuel combustion
- Company vehicles
- Industrial processes
Scope 2 emissions
Indirect emissions from purchased electricity, heating or cooling.
Scope 3 emissions
Indirect emissions occurring throughout the value chain, including suppliers, transport, business travel and waste.
Although transitional arrangements apply to some Scope 3 disclosure requirements, organisations should begin understanding relevant value chain emissions now because supplier engagement often requires significant lead time.
A structured carbon accounting and management approach can help organisations build reliable emissions baselines across Scope 1, Scope 2 and relevant Scope 3 sources.
Improve Data Collection Systems
Reliable reporting depends on reliable information.
Many organisations currently hold environmental data across multiple spreadsheets, departments and operational systems.
Preparing for mandatory reporting often involves improving:
- Energy data collection
- Fuel consumption records
- Waste reporting
- Water consumption records
- Supplier information
- Internal documentation
Businesses should also establish documented methodologies so reporting remains consistent year after year.
Good data management supports both regulatory compliance and better business decision-making.
Assess Climate Risks and Opportunities
Mandatory climate reporting requires organisations to consider how climate change may affect future financial performance. This includes assessing both:
Physical risks
Such as:
- Flooding
- Bushfires
- Heatwaves
- Severe weather events
- Water availability
Transition risks
Such as:
- Policy changes
- Carbon pricing
- Technology shifts
- Market expectations
- Customer behaviour
Businesses should also consider climate-related opportunities, including operational efficiencies, innovation and emerging market demand.
A structured climate risk assessment provides valuable insights that extend well beyond compliance and
supports reporting, strategy and resilience planning.
Integrate Climate into Business Strategy
Climate reporting should reflect how sustainability influences long-term business planning. Rather than creating a separate sustainability document, organisations must demonstrate how climate considerations are integrated into:
- Corporate strategy
- Risk management
- Capital investment
- Operational planning
- Performance monitoring
Integrating climate considerations into broader planning also strengthens a business’s overall sustainability strategy, helping reporting activity connect with long-term goals, governance and performance improvement.
Investors and regulators expect climate-related information to align with broader financial reporting and business strategy.
Review Internal Controls
As the regime is phased in, assurance requirements are expected to increase over time. Businesses should therefore establish strong internal controls early in the process. This includes reviewing:
- Data verification processes
- Documentation standards
- Record retention
- Management approvals
- Internal quality assurance
Well-documented systems improve confidence in reported information and simplify future assurance activities.
Engage Suppliers Early
For many organisations, obtaining value chain information becomes one of the greatest reporting challenges. Businesses should begin communicating with key suppliers about:
- Emissions information
- Sustainability practices
- Data availability
- Reporting expectations
Large reporting entities are increasingly requesting climate information from suppliers to support their own disclosures, meaning businesses throughout the supply chain are likely to experience growing information requests over the coming years.
Develop an Implementation Roadmap
Preparing for climate reporting is typically a multi-stage project rather than a single compliance activity. Once reporting obligations are confirmed, an implementation roadmap may include:
Step 1: Gap assessment
Step 2 : Governance development
Step 3: Data collection and emissions inventory
Step 4: Climate risk and opportunity assessment
Step 5: Emission reduction plans and strategy and modelling
Step 6: Internal reporting and documentation
Step 7: Annual reporting and continuous improvement
Breaking the work into manageable stages helps organisations build capability while reducing pressure close to reporting deadlines.
How The Ecoefficiency Group Can Support Your Climate Reporting Journey
Preparing for mandatory climate reporting requires more than understanding the legislation. Businesses also need practical systems, reliable data and a structured approach that aligns with the Australian reporting framework.
The Ecoefficiency Group works with organisations to be ‘assurance ready’ – helping them prepare for mandatory climate reporting through services such as climate reporting readiness assessments,preparation of GHG inventories,, climate risk and opportunity assessment and practical disclosure support aligned with AASB S2. By helping businesses identify gaps early and establish robust reporting processes, organisations can approach compliance with greater confidence while strengthening their overall sustainability strategy.
Taking action now allows businesses to spread the workload, improve reporting quality and avoid unnecessary pressure as reporting deadlines approach.
Conclusion
With Group 2 mandatory climate reporting commencing for financial years beginning on or after 1 July 2026, now is the ideal time for eligible Australian businesses to prepare. Organisations that begin planning early will be better positioned to develop accurate emissions data, strengthen governance, assess climate-related risks and establish reporting processes that support ongoing compliance.
Mandatory reporting is more than a regulatory obligation. It is an opportunity to better understand climate-related risks, improve transparency and strengthen long-term business resilience. By taking practical steps today, businesses can move into the new reporting era with confidence and a clear path towards sustainable growth.